The Future of Taxes - A Call to Action

A Call to Action for Congress and the Obama Administration

Restore the most progressive elements of our federal income tax. We must restore the top two marginal income tax brackets to their pre-Bush levels for the top 5% of income earners (from 33% to 36%, and from 35% to 39.6%). Congress should consider going further and adding a new top income tax bracket, higher than the 39.6% rate, for those paid more than a two million dollars per year.

End the preferential treatment of investment income vs. income earned through work. Our current policy of taxing income earned through investments (capital gains and dividends) at a top rate of 15%, while income earned through actual employment is taxed at a top rate of 35%, is an affront to the American work ethic. Congress and the Administration should begin by lettingcapital gains and dividend rates revert to their pre-Bush levels. Long-term, Congress and the Administration should consider going further by fully taxing capital gains and dividends at the same level as earned income.

Preserve a strong estate tax to help ensure an economy that rewards personal work over birthright. It’s not a question of whether parents should be able to pass on wealth to their children. It’s a question of how much is enough. Under the already weakened 2009 estate tax law, with its $3.5 million exemption, a child of a wealthy couple can inherit more, tax free, than the average worker earns in two whole lifetimes. Congress should go beyond the soft 2009 law and pass the McDermott Bill, with its $2 million exemption ($4 million for couples) and 45% rate, with 55% rate on larger estates.

A majority of Americans support ending the Bush tax cuts for the wealthy.Recent polls show that 60% of Americans support raising the income tax on those earning more than $250,000 a year, including 64% of those who earn more than $250,000 a year! It is up to us to mobilize that majority of Americans who are ready to dial back the clock of yesterday’s misguided policies, and lay the foundation for a more broadly shared prosperity.

To see how the Obama Administration's federal tax proposals compare with tax rates during the Bush Administration and with what's currently on the books for 2011, check out our handy Tax Provisions Overview (PDF - 576 KB).